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The Complicated Economics of Sweatshops

Once in a while, I read through my childhood diary. As I do, my nine-year-old self leaps from its pages and proclaims her plans to save the world. It’s interesting to see what things impacted my life at that age.

I must have learned about farming practices at that time, as my nine-year-old self declared that she would one day ensure that all of the cows in the world would be treated fairly. Like most children growing up post 9/11, I also at one point declared in my diary that I would stop the war in Iraq, something that in hindsight seems rather dark for a nine-year-old to fixate on.

My childhood self also made plans to force all of the sweatshops in the world to go out of business. Thus, all of the people working in sweatshops would be liberated, and they could get better jobs. Simple.

A young girl in a garment factory in Bangladesh. Image credit: saybrookproductions

Every now and again, economists analyze sweatshops, and we are reminded that the pros and cons of easily accessible but hazardous labour are anything but simple.

Tim Harford recently wrote a piece for the Financial times about an experiment conducted in Ethiopia regarding employment in sweatshops. During the experiment, Chris Blattman, a political scientist at the University of Chicago, and Stefan Dercon, the chief economist of the UK’s Department for International Development, teamed up with five different employers of low-waged manufacturing businesses. After receiving a long list of applications from aspiring industrial workers (most of them young women), the Ethiopian employers, guided by Blattman and Dercon, assigned each applicant into one of three groups: “those given a job offer, those turned down for a job, and a third category,” to be discussed later.

The objective of the experiment was to monitor the earnings of the workers in each of the three situations. The randomisation of workers ensured an unbiased comparison of the progress of each group of people. After a year of monitoring, what Blattman and Dercon discovered surprised them.

The workers who accepted their jobs at factories would often only stay there for two or three months at a time. By the end of the experiment, when a year had passed, two-thirds of the people initially accepted into category one had left their job and also quit working in the industrial sector altogether.

“In terms of earnings, industrial jobs are not worse than the alternatives,” says Stefan Dercon. “We just thought they would be better.”

The sweatshop industry offers a mixture of benefits and drawbacks to people living in an industrial economy like Ethiopia’s. On the one hand, dangerous working conditions place hazardous risks to a worker’s health. For example, as pointed out by Harford, cotton fibres floating in textile factories can lead to breathing and lung problems. But on the other hand, these jobs are often used by young people who have yet to establish themselves professionally when money is tight and when funds are needed immediately and quickly. The wages in sweatshop factories are unfair, and their conditions are not ideal, but the alternative to this capitalist exploitation is unemployment. Or worse still, as pointed out by Harford, “gruelling” labour in a rural countryside.

The treatment of the sweatshop worker, as a piece in a machine to be replaced often by a quick turnover rate, may seem cruel. However, the constant coming and going of workers from these factories ensure that a job, no matter how questionable, can be found in times when employment is most crucial. Can factories do better, to raise their working conditions? Certainly. But to completely do away with the factories altogether, on the grounds of their labour practices, could lead to dire consequences. Consider the argument of Sam Bowman, a writer for IBT times, when addressing the criticism Beyonce faced for creating a clothing line using poorly paid Bangladeshi workers:

“Moving jobs away from poor countries to richer ones is really not good at all for poor people who once worked in those jobs. A 2006 study by economists Ben Powell and David Skarbek found that wages in sweatshops, though low by Western standards, were higher than average wages in nearly all of the countries they operated in. In half of the countries studied, sweatshop wages were over three times the national average.

It is a truism that these jobs must be the best jobs available to these workers. Why would they take them if they had a better alternative option? As one of the workers told The Sun, “‘We had to come and work here because our father could not afford to feed us and there are no jobs there.’ Boycotting the factory would not help her one bit.”

There are, of course, other ways to allow people to work themselves out of poverty. We now arrive at the third group in Blattman and Dercon’s experiment. This group was given $300 dollars, and “five days of entrepreneurship training,” instead of a job at a sweatshop or a rejection. Blattman and Dercon found that “the lottery winners, on average, managed to start a business or otherwise get themselves into a position where they were earning substantially more than people who’d been offered factory jobs.” Industrial work is a valuable tool for economic development in many countries. But it is also worth remembering, as we examine the rocks and hard places we have created for workers in the West’s exploitive textile industry, that “with finance and advice, people can prosper in other ways, too.”

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About the Author

Sharon Kashani is a Masters of Arts in English Literature recipient from the University of Toronto. Upon applying for graduate school, Sharon was honoured to receive the major federal award for humanities doctoral programs in Canada, The Joseph-Armand Bombardier CGS-SSHRC Masters Scholarship. Her SSHRC proposal, entitled Gender and Sexuality in Novelistic Works, described a project that aimed to chart the subversive tendencies of women writers through their depictions of sexuality and gender in novels. Most recently, Sharon has completed her Masters and is excited to now be writing for Trusted Clothes.